Packer protects new producers

Picture: More space means more money

Egg packer Stonegate has introduced a two-tier pricing structure in an effort to protect its free range suppliers who are stocking at the EU’s new lower densities.

Following a trend set by Deans last month Stonegate has been forced to react to market conditions and reduce producer prices. But those suppliers stocking at nine birds per metre—as stipulated by the EU welfare directive—have seen payment reduced by only 0.5 pence a dozen, while those enjoying the derogation on stocking rates have seen 1.5 pence knocked off their price.

Commenting on the current market, divisional director Richard Kempsey said: “Our fears during the summer and autumn of an increased UK bird base and an over rapid expansion of free-range have been borne out in the post-Christmas trading period.“

And while Stonegate recognise that adjusting prices is a crude means of addressing market conditions, the company is eager to help those producers who are stocking at lower rates.

“We are keen to support those producers who are stocking at nine birds a square metre and face a different costing model to those producing in excess of this figure,” said Mr Kempsey in a letter to suppliers.

“As an industry it is important that the producers who have made recent large investments in modern facilities are not totally disadvantaged to those who have the ability to stock at higher levels based on the length of time they have been producing eggs. Therefore, for the first time we are skewing the prices paid to producers dependant upon their stocking density.”

Stonegate is still warning that continued expansion in the free range sector could see producer prices drop even further.

“As a word of caution we reiterate our prior advice that further production expansion can only lead to more severe measures being taken,” says the packer.

Deans led the way on price cutting last month when they knocked one pence off their free range price but this was nothing compared to the blow handed out to their cage and barn egg suppliers. They saw over five pence a dozen knocked off their weighted average price.

The company told its contracted producers that a sustained price recovery depended heavily on a cut-back in the levels of cage and barn egg production.